Bitcoin is certainly biding its time in the week of the U.S. presidential inauguration—what might the coming days have in store?
After a quiet weekend which will have come as a welcome break to traders, the largest cryptocurrency has yet to make a decisive move.
Altcoins are flavor of month
In a surprise change of tune, Bitcoin managed to avoid volatility altogether this weekend. Instead of hitting new highs or testing major support levels, BTC/USD simply remained within its recently established trading corridor between $30,000 and $40,000.
As previously noted, a pattern of compression continues to characterize the market, this involving Bitcoin making a series of higher lows and lower highs—shaking out volatility. This in turn sets the stage for a breakout, but the timing of this is always uncertain.
Nevertheless, price action focused on $36,000 throughout the weekend, as Bitcoin began to diverge from altcoins in its behavior.
“We can see that Bitcoin is consolidating, and Bitcoin consolidating suits the altcoins relatively well and we see them popping left and right,” popular trader Michaël van de Poppe summarized in a YouTube update on Sunday.
“(The) market is still eager for some further corrections on Bitcoin as we’ve just witnessed a 4X (increase) in general, so a slight correction would not be unhealthy—or at least consolidation—and luckily we’re getting those[.]”
With previous highs of $42,000 far from retested, Bitcoin thus retreated in terms of investor coverage, while other tokens stepped in to create a new trading focus. Among them were six of the top 100 cryptocurrencies by market cap which posted 24-hour gains of 20% or more. The top performer was The Graph (GRT) with over 50% returns. Weekly performance also showed altcoin markets’ strength, with seven tokens gaining at least 100% and leader HedgeTrade (HEDG) topping 250%.
At the same time, Bitcoin’s share of the overall market cap began falling in step, reaching 66.3% on Monday.
Zooming out, however, and skepticism of altcoins’ true resilience remained. As noted by Nik Patel, author of “An Altcoin Trader’s Handbook,” the difference in BTC terms between today’s altcoins and their peak in January 2018 is plain to see.
“For ALT/BTC context, top 100 at the peak in Jan 2018 were ~23,450 BTC or higher in market cap, currently ~5,235 BTC,” he tweeted on Monday.
Responding, Blockstream CEO Adam Back was characteristically dismissive of non-Bitcoin cryptocurrency potential.
“Lesson? Dont get stuck bag holding alts. Something 90% down can fall another 90%. With 7000 alts and new ones every day they are not coming back. Convert to #Bitcoin,” he wrote.
No signs of a Bitcoin breakout
For Bitcoin, meanwhile, macro events as price triggers were limited. The inauguration of President-elect Joe Biden will come with executive orders which may influence dollar performance as they reverse the Donald Trump administration on multiple issues.
Nonetheless, last week’s announcement of a $1.9 trillion coronavirus stimulus package was a non-issue for Bitcoin, which barely reacted.
“Rumor and speculation about stable coins, alt coins, exchanges, & CBDCs (central bank digital currencies) are irrelevant to rational investors holding #Bitcoin as a store of value,” MicroStrategy CEO Michael Saylor explained about the BTC investor mindset this weekend.
Nevertheless, analysts at major exchange BTCC saw cause for short-term risk to increase thanks to changes in the U.S.
“As the correlation between Bitcoin and the traditional financial market increases, a gradual increase in the U.S. bond yield causes great selling pressure on the price of Bitcoin,” they wrote in a blog post.
“However, with Biden’s 1.9 trillion stimulus plan coming, Bitcoin as a hedging tool to the inflation is expected to remain bullish. Thus, a further correction could be a good chance to accumulate Bitcoin.”
Eyeing exchange support and resistance levels revealed significant bids at $33,000 and $30,000, with sellers lined up at every $1,000 boundary between the spot price at $36,100 and all-time highs of $42,000.
“I’m modelling a floor price around ~$29k (daily closing price) for a worst case lower bound[ry] in this consolidation,” statistician Willy Woo confirmed. Woo channeled a previous analogy between serial Bitcoin hodlers and the Rickrolling song by popular eighties popstar Rick Astley.
“Meanwhile the Rick Astleys of this world are hoovering up more coins, they are never gonna let you down, nor desert you,” he added on Twitter.